Average passenger growth for April-May was 16.4% y-o-y (v/s 22% in FY17), driven by 14.8% y-o-y growth in ASK (v/s 20% in FY17). Average RPK grew ahead of ASK at 16.7% y-o-y, v/s 22% in FY17, due to increased PLF at 87.2% , 84.4% in FY17. We believe slower domestic capacity addition and peak load factor in a seasonally strong period should allow airlines to exercise some pricing power.

In Q1FY18, ATF price declined 5% q-o-q , from Rs 55.4/litre in Q4FY17, and increased 16% y-o-y , from Rs 45.4/litre in Q1FY17, to Rs 52.7/litre. Rupee appreciation along with lower ATF prices and increased air ticket fares should result in sequentially higher profitability for airlines. As expected, headline fares have picked up in a seasonally strong Q1. IndiGo’s slower capacity addition in the domestic market , 17% in April-May 2017 v/s 25% earlier) gives a breather for yields in the domestic market. We believe increased air ticket fares along with lower ATF prices, down ~6% q-o-q, and rupee appreciation would further support airlines’ profitability in Q1FY18.